We track the number of NICS firearm background checks on a regular basis as it often provides interesting insights on the mood of Americans or the direction of political winds regarding gun control legislation. In times of higher volatility, uncertainty, or concerns that lawmakers in Washington will enact stricter legislation for firearms, purchases tend to rise. On the other hand, in periods of stability, background checks tend to fall. Ever since June of last year, background checks have been declining on a y/y basis, but the y/y decline moderated in June. Although still down 15.8% compared to last year, purchases moved higher sequentially for the first time in three months. Click here to learn more about Bespoke’s premium stock market research service.
Although checks moved higher month over month, they are likely to rise even further in July due to the Supreme Court’s recent ruling against the state of New York. This case expands the right to carry, and will likely increase firearm purchases in some of the most restrictive cities, such as New York and Los Angeles. In June, background checks rose by over 230K to reach 2.6 million. Although checks are in a near-term down-trend following the COVID spike, the longer-term uptrend is still very much intact.
On a YTD basis, background checks have declined at the fastest rate on record. This is largely due to elevated comps, as 2021 saw background checks near record levels due to a growing political divide, COVID lockdowns, and fears over legislation with Democrats in full control of Washington D.C.
Although background checks moved higher month over month, Sturm Ruger (RGR) and Smith and Wesson (SWBI) hit 52-week lows in June. All-in-all, RGR traded 6.3% lower in June, and SWBI declined 15.2%. The stocks have been weighed down by slowing sales over the last couple of quarters, increased legal risk associated with firearm manufacturer liability, and the pull of the overall market tide. Both these stocks are still in sustained downtrends, and even after initially moving higher following the Supreme Court decision, both stocks have essentially come full circle. Click here to learn more about Bespoke’s premium stock market research service.